Fix or not - brain is hurting!

lazysaver_2

I have been mulling this over for a couple of days now but losing the wood for the trees! I hope people can give me a more removed and rational view. Have total mortgage of £113k on a £240k property (post-crash value).

We are coming to the end of a fixed deal and tracker deal on two mortgages and revert to 2.5% with Nationwide. Currently paying £616 which will drop to £487. My inital feeling was to stay on the variable rate and overpay, this is also what the Nationwide mortgage advisor said (even though I know they are not supposed to advise). We are also looking to buy a house sometime next year.

I then had a panic about the fixed rates going up and 5 year deals being better than 2 or 3 so bagged the Natwest 5yr fix at 4.69%, costing about £10 a month more than we are paying now. Haven't signed the paperwork yet but was approved in principle over the phone as hubby is a customer.

But I then realised that when we come to move and take out further borrowing we will be stuck with Natwest and whatever products they have at that time. We will also increase the mortgage so LTV will end up at about 65% although I think anything up to 75% gets the better rates with Natwest.

I do think the BOE rates will stay low, but I would like to fix when moving to a larger property for the security - and I really don't know how high the fixed rates will go over the next year. Obviously the bank rates and BOE rates aren't tied (major law change needed here!) and I personally think lenders are taking advantage of the financial situation and borrowers trying to fix and protect themselves from uncertainty so have hiked up the rates to re-line their coffers (or is that a bit cynical!?)

So do we stay on the BMR and take out a new fix next year hoping the rates aren't silly (say over 6%), or fix now and protect the current loan, dealing with just the extra borrowing when the time to move comes?? By this time we would be 1 year (or so) into the fixed 5 year deal, so will still have 2 morgages running, although I don't mind this too much, but it would be simpler to have it all on one deal.

Can anyone make any sense of this??!! Any opinions gratefully appreciated

Joe_Bloggs

I can't help directly but the Bank of England base rate has no effect or influence on fixed term rates. As a consumer one may think that the BOE rate has a significant influence on general interest rates. The real world seems to ignore them. Fortunately many mortgage trackers were based on this rate and the holders of BOE tracker morgtages could use the low rate to their advantage.

I do not know what will happen to the Bank of England rate of 0.5% other that to say that it is totally irrelevant in the real world.

Swap rates are what seem to determine the fixed rates that mortgage lenders can lend. Speculation, marketing, and consumer demand has driven these rates up.

J_B.

dimbo61

First of all a 5 year fix at 4.69% is a good deal and gives you security of payments on the £113k you owe at the moment.
How much more do you think you will need to borrow to buy the next property ?
What you and OH earn each month and savings need to be considered.
Everyone is different in how they spend there income and what they can afford.
I like the security of having a fixed rate deal ( mine goes onto a tracker of BOE + 0.75% ) BUT not till 2011!!!
If you are happy with the Natwest deal and want to fix now then borrow the extra when you do sell whats the problem?
Make sure its portable and hope rates dont climb to much in the next year/18 months.

Peelerfart

Opinion ONLY .

Hold your nerve ,2.5% is a good rate ,as is your LTV,and flexibilty is important to you.

confused31_2

ive just fixed for 5 years, but this was a personal choice, i wouldnt want to try to get a fixed deal when the boe base rate goes up, why dont you just secure a deal now, i think you have three months to sign it, and in the meantime you can relax, if interest rates havent gone up in 3 months, apply for another deal and then you have secured another rate for 3 months.

If you dont do this and i suspect a lot of people wont, when interest rates go up the banks will pull most the deals as soon as the boe rates go up, and then higher fixed deals will come out.

Codman

confused31 wrote: »

why dont you just secure a deal now, i think you have three months to sign it, and in the meantime you can relax, if interest rates havent gone up in 3 months, apply for another deal and then you have secured another rate for 3 months.

Hello there, apologies for gatecrashing this thread, but saves starting another!

I am considering securing a deal with the Post Office - 5yr fix at 4.45% and then sitting on it to see what happens with the boe rate and the fixed rate mortgages available as suggested above. However they have a £599 application fee which I am guessing is to deter you from doing just this sort of thing - I am not too keen on paying £599 on a product I am not entirely sure I will be taking on. Is this in fact the case or is this application fee just payable when you sign on the dotted line having decided to proceed with the offer?

Thanks
Codman

lazysaver_2

Thank you so much for your views everyone! The different responses are all ones that have gone through my head.

I am now getting a little nearer to making a decision! I think i'll sign the "key facts" document from Natwest as that keeps things ticking along with no actual committment. I also had another spreasheet attack and although I would like to brave it like Peelerfart (best username ever - please say its your real name!) fixing would stop me stressing over it (and give my husband some peace!).

I think i'll fix as we are likely to be borrowing the same amount again (another 115k approx) so even if the fixed rates to go up to say 6%, the interest rate over the 2 mortgages will average out at about 5.35, which would still be fairly reasonable and affordable.

I am loathe to give up the flexibility but Natwest rates do seem fairly reasonable compared to other lenders - unless anyone else thinks tieing to them would be a bad idea?

thefourbennetts

Hi, We have just fixed for seven years with abbey for 4.99%. We wanted to pay what we are now and just have the peace of mind that things wouldnt go up. We have available monies to pay an increase in mortgage but now I am just happy it is all sorted for the next 7 years. Yes, it is a lottery, we may lose out but decision made now and I stand by it :T

lazysaver_2

Hi everyone,

Well I have finally made a decision - am bottling it and going with the fixed rate with natwest at 4.69% for 5 yrs. It only adds an extra £3 on my monthly payment.

If we had no plans to move I would stay on the BMR and enjoy it but as we will probably double the loan within a year I can't risk 200k at say 6% (or more). I figure its better to have £100k at 4.69% and £100k at (say) 6% then the whole lot at an unknown higher rate.

And if the fixed rates do come down, the paperwork says we can end our deal and avoid most (if not all) the ERC's if we take out further borrowing, which we definitely will. For £299 and free val and legals, I think that's a pretty fair deal with a getout clause if the fixed rates fall.

Thanks for everyone's thoughts on this - even if it turns out to be the wrong decision in the long run, I know I will have thought it through the best I can so am happy with it. My personal record on this has been pretty good in the past so hope I haven't lost my touch this time!!

I will leave you all in peace now.

Well probably not, but thanks again.

sarmia

When did you take this out? Was this before the increased rates?

sarmia

I'm also intriged about swopping the deal, can that be at anytime?